Tuesday, August 31, 2010

Smith is well known for his role as lead counsel in an oilfield radiation case that resulted in a verdict of $1.056 billion against ExxonMobil for contaminating land it leased from the Grefer family in Harvey, Louisiana –– and attempting to cover it up.

***

The court stated that from June 1986 to March 1987, “Exxon officials intentionally withheld information,” and that the company “knew the [radioactive] scale posed a direct danger to the physical health of those workers.” Oilfield waste, or TERM, is primarily composed of radium, a highly radioactive chemical element. Exposure to radium is known to cause a variety of devastating illnesses, including cancer. Radium’s impact on the human body is particularly acute because it is similar chemically to calcium –– and as such is frequently absorbed into bones after entering the body.

But at least there's no radiation being released from BP's oil spill in the Gulf, right?

This is directly from the EPA website discussing oil drilling activity:

“These processes may leave behind waste containing concentrations of naturally-occurring radioactive material (NORM) from the surrounding soils and rocks. Once exposed or concentrated by human activity, this naturally-occurring material becomes Technologically-Enhanced NORM or TENORM. Radioactive materials are not necessarily present in the soils at every well or drilling site. However in some areas of the country, such as the upper Midwest or Gulf Coast states, the soils are more like to contain radioactive material.”

“Radioactive wastes from oil and gas drilling take the form of produced water, drilling mud, sludge, slimes, or evaporation ponds and pits. It can also concentrate in the mineral scales that form in pipes (pipe scale), storage tanks, or other extraction equipment. Radionuclides in these wastes are primarily radium-226, radium-228, and radon gas. The radon is released to the atmosphere, while the produced water and mud containing radium are placed in ponds or pits for evaporation, re-use, or recovery.”

“The people most likely to be exposed to this source of radiation are workers at the site. They may inhale radon gas which is released during drilling and produced by the decay of radium, raising their risk of lung cancer. In addition, they are exposed to alpha and gamma radiation released during the decay of radium-226 and the low-energy gamma radiation and beta particles released by the decay of radium-228. (Gamma radiation can also penetrate the skin and raise the risk of cancer.) Workers following safety guidance will reduce their total on-site radiation exposure.”

It’s time BP comes clean as to the levels and amounts of radioactive material released from this oil spill.

What scientists call naturally occurring radioactive materials—known by the acronym NORM—are common in oil and gas drilling waste, and especially in brine, the dirty water that has been soaking in the shale for centuries. Radium, a potent carcinogen, is among the most dangerous of these metals because it gives off radon gas, accumulates in plants and vegetables and takes 1,600 years to decay.

And some argue that the deeper you drill, the more likely that the oil will be radioactive. As Newsweek reported in March:

Environmentalists argue that we can achieve energy independence by cutting demand and ramping up renewables. They add that the thousands of gallons of mud deepwater drilling unearths contain toxic metals—mercury, lead, and cadmium—that may end up in the seafood supply. The water that comes up from wells contains a toxic mix of benzene, arsenic, lead, and various radioactive pollutants, according to studies by the Natural Resources Defense Council.

This is not to say that radiation is being released from the well at dangerous levels for the general public. Obviously, BP and the government should be pressed to release all radiation test results (or to do them if they haven't already). I haven't heard any information indicating dangerous levels, and I'll assume for now that radiation levels in the Gulf as a whole are low and not much more than background levels.

However, for the clean up workers, and when it is concentrated in landfills, crude oil from the Gulf might be a real health threat. As Smith writes:

This is all bad enough at the spill and cleanup sites, and it’s not nearly the near-term danger of all the toxins in the oil-dispersant stew. But it can become a danger when you start concentrating it in normal landfills. Remember, oil was exempted from hazmat regulations for political reasons, not because it’s not hazardous.

And, as far as we can tell, nobody is even testing the BP waste going into those landfills and if the oil company knows radiation levels, we can expect them to keep it secret. Hey, this is the company that required a Congressional order and a Federal Court Subpoena just to release video of the spill … we have no way of knowing what else they’re not telling us.

And it’s not comforting that the EPA, which allowed BP to use toxic dispersant to hide the oil and is now minimizing what’s left through bogus science, and the Coast Guard, which allowed dispersant use even in excess of what the EPA approved, are in charge of all this. And the EPA knows better, of course.

Lumpy, degraded oil collected in the Mississippi Sound has tested positive for several of the main ingredients in the Corexit dispersant used in connection with the Deepwater Horizon oil spill, according to scientists working for a New Orleans-based lawyer.

Officials with the federal government and BP PLC have maintained throughout the oil spill that no dispersant products have been used near shorelines in Alabama or Mississippi.

***

Marco Kaltofen, part of the group of scientists who found the oil in Mississippi Sound, said it was impossible to determine when the dispersant had been applied to the oil. Results from the tests, which were conducted in a Colorado laboratory, indicated the oil was from the Deepwater Horizon well, he said.

***

“EPA samples found only one indication of dispersant near shore in Louisiana. That location was sampled several times with no other detection,” U.S. Environmental Protection Agency spokeswoman Terri White said in a Monday e-mail. “There is no authorization to apply any dispersant at this time. If anyone has information about this, they need to report it immediately so it can be investigated and referred to law enforcement.”

***

Smith, the lawyer who funded Kaltofen’s sampling expedition, discounted the notion that dispersants had not been used near shore.

“I personally saw C-130s applying dispersants from my hotel room in the Florida Panhandle. They were spraying directly adjacent to the beach right at dusk,” said Smith. “Fishermen I’ve talked to say they’ve been sprayed. This idea they are not using this stuff near the coast is nonsense.”

Monday, August 30, 2010

Recreational fisherman Mark Fuqua, 47, of Pensacola, who has fished the waters from Destin to Pensacola most of his life, discovered just how big the mess is on the first day he struck out to drop a line in the water since the fishing ban was lifted two weeks ago.

After a day of fishing in several areas of the bay on Wednesday, his boat, anchor and cast net were covered in oil.

"I've never seen anything like it," he said. "I was fishing in front of Palafox Pier and pulled up my anchor, and it looked like it had black mud on it. I reached down to try to wipe it off and it was all greasy, like greasy sand."

The anchor was dropped in 20 feet of water.

[Scott Piggott, who heads the Escambia and Santa Rosa cleanup operation for BP] said the reports from fishermen about finding oil often are not reliable.

"I've heard accounts of people who hold up their anchors that have this black stuff on it," he said. "I can't tell you how many times we've gotten reports from fishermen with sightings of sheen and oil. Ninety-nine percent of the time, these reports turn out to be organic material."

Fuqua said Piggott's statement "sounds typical."

"BP is really counting on that out-of-sight, out-of-mind thing. It's there and they know it," he said. "They need to be exposed and made to do something about it."

Sure, and the oil plumes and dispersant which experienced scientists think they are finding in the Gulf are really just kelp, and the dead animals which people see are really just sleeping, and the rashes and breathing problems coastal residents exposed to the dispersant are suffering are really just allergies.

Yesterday, former Secretary of Labor Robert Reich pointed out that quantitative easing won't help the economy, but will simply fuel a new round of mergers and acquisitions:

A debate is being played out in the Fed about whether it should return to so-called "quantitative easing" -- buying more mortgage-backed securities, Treasury bills, and other bonds -- in order to lower the cost of capital still further.

The sad reality is that cheaper money won't work. Individuals aren't borrowing because they're still under a huge debt load. And as their homes drop in value and their jobs and wages continue to disappear, they're not in a position to borrow. Small businesses aren't borrowing because they have no reason to expand. Retail business is down, construction is down, even manufacturing suppliers are losing ground.

That leaves large corporations. They'll be happy to borrow more at even lower rates than now -- even though they're already sitting on mountains of money.

But this big-business borrowing won't create new jobs. To the contrary, large corporations have been investing their cash to pare back their payrolls. They've been buying new factories and facilities abroad (China, Brazil, India), and new labor-replacing software at home.

If Bernanke and company make it even cheaper to borrow, they'll be unleashing a third corporate strategy for creating more profits but fewer jobs -- mergers and acquisitions.

Similarly, Yves Smith reports that quantitative easing didn't really help the Japanese economy, only big Japanese companies:

When an economy is very slack, cheaper money is not going to induce much in the way of real economy activity.

Unless you are a financial firm, the level of interest rates is a secondary or tertiary consideration in your decision to borrow. You will be interested in borrowing only if you first, perceive a business need (usually an opportunity). The next question is whether it can be addressed profitably, and the cost of funds is almost always not a significant % of total project costs (although availability of funding can be a big constraint)…..

So cheaper money will operate primarily via their impact on asset values. That of course helps financial firms, and perhaps the Fed hopes the wealth effect will induce more spending. But that’s been the movie of the last 20+ years, and Japan pre its crisis, of having the officialdom rely on asset price inflation to induce more consumer spending, and we know how both ended.

….these macroeconomic analyses verify that because of the QEP, the premiums on market funds raised by financial institutions carrying substantial non-performing loans (NPLs) shrank to the extent that they no longer reflected credit rating differentials. This observation implies that the QEP was effective in maintaining financial system stability and an accommodative monetary environment by removing financial institutions’ funding uncertainties, and by averting further deterioration of economic and price developments resulting from corporations’ uncertainty about future funding.

Granted the positive above effects of preventing further deterioration of the economy reviewed above, many of the macroeconomic analyses conclude that the QEP’s effects in raising aggregate demand and prices were limited. In particular, when verified empirically taking into account the fact that the monetary policy regime changed under the zero bound constraint of interest rates, the effects from increasing the monetary base were not detected or smaller, if anything, than during periods when there was no zero bound constraint.

Yves here, This is an important conclusion, and is consistent with the warnings the Japanese gave to the US during the financial crisis, which were uncharacteristically blunt. Conventional wisdom here is that Japan’s fiscal and monetary stimulus during the bust was too slow in coming and not sufficiently large. The Japanese instead believe, strongly, that their policy mistake was not cleaning up the banks. As we’ve noted, that’s also consistent with an IMF study of 124 banking crises:

Existing empirical research has shown that providing assistance to banks and their borrowers can be counterproductive, resulting in increased losses to banks, which often abuse forbearance to take unproductive risks at government expense. The typical result of forbearance is a deeper hole in the net worth of banks, crippling tax burdens to finance bank bailouts, and even more severe credit supply contraction and economic decline than would have occurred in the absence of forbearance.

Cross-country analysis to date also shows that accommodative policy measures (such as substantial liquidity support, explicit government guarantee on financial institutions’ liabilities and forbearance from prudential regulations) tend to be fiscally costly and that these particular policies do not necessarily accelerate the speed of economic recovery. Of course, the caveat to these findings is that a counterfactual to the crisis resolution cannot be observed and therefore it is difficult to speculate how a crisis would unfold in absence of such policies. Better institutions are, however, uniformly positively associated with faster recovery.

But (to put it charitably) the Fed sees the world through a bank-centric lens, so surely what is good for its charges must be good for the rest of us, right? So if the economy continues to weaken, the odds that the Fed will resort to it as a remedy will rise, despite the evidence that it at best treats symptoms rather than the underlying pathology.

Keynes implemented his policies in an era of much less debt than we have today. We're now bankrupt, with debt levels so high that they are dragging down the economy.

Even if Keynesian stimulus could help in our climate of all-pervading debt, Washington has already shot America's wad in propping up the big banks and other oligarchs.

***

Keynes implemented his New Deal stimulus at the same time that Glass-Steagall and many other measures were implemented to plug the holes in a corrupt financial system. The gaming of the financial system was decreased somewhat, the amount of funny business which the powers-that-be could engage in was reined in to some extent.

As such, the economy had a chance to recover (even with the massive stimulus of World War II, unless some basic level of trust had been restored in the economy, the economy would not have recovered).

A little extra water in the plumbing can't fix pipes that have been corroded and are thoroughly rotten. The government hasn't even tried to replace the leaking sections of pipe in our economy.

Quantitative easing can't patch a financial system with giant holes in it.

What's needed has been obvious to independent observers for years: Break up the big banks, prosecute the criminals whose fraud caused the financial crisis, and restore the rule of law and transparency.

Saturday, August 28, 2010

In February 2009, the head of U.S. intelligence - Dennis Blair - said that the global financial crisis was the largest threat to America's national security. All of America's intelligence agencies apparently agreed.

The same month, the chairman of the Joint Chiefs of Staff - Admiral Mullen - also agreed.

Now, Mullen is focusing on a specific economic threat. Specifically, Mullen is focusing on the debt:

The national debt is the single biggest threat to national security, according to Adm. Mike Mullen, chairman of the Joint Chiefs of Staff. Tax payers will be paying around $600 billion in interest on the national debt by 2012, the chairman told students and local leaders in Detroit.

“That’s one year’s worth of defense budget,” he said, adding that the Pentagon needs to cut back on spending.

But at least war is good for the economy, right? At least spending on defense will help the economy recover and climb out of this pit of debt, no?

Actually, no.

Nobel-prize winning economist Joseph Stiglitz has said that war can be very bad for the economy. For example, in 2003, Stiglitz wrote:

War is widely thought to be linked to economic good times. The second world war is often said to have brought the world out of depression, and war has since enhanced its reputation as a spur to economic growth. Some even suggest that capitalism needs wars, that without them, recession would always lurk on the horizon.

Today, we know that this is nonsense. The 1990s boom showed that peace is economically far better than war. The Gulf war of 1991 demonstrated that wars can actually be bad for an economy.

Stiglitz has said that this decade's Iraq war has been very bad for the economy. See this, this and this.

The U.S. is adding trillions to its debt burden to finance its multiple wars in Iraq, Afghanistan, Yemen, etc.

Two top American economists - Carmen Reinhart and Kenneth Rogoff - show that the more indebted a country is, with a government debt/GDP ratio of 0.9, and external debt/GDP of 0.6 being critical thresholds, the more GDP growth drops materially.

The relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies...

War always causes recession. Well, if it is a very short war, then it may stimulate the economy in the short-run. But if there is not a quick victory and it drags on, then wars always put the nation waging war into a recession and hurt its economy.

You know about America's unemployment problem. You may have even heard that the U.S. may very well have suffered a permanent destruction of jobs.

But did you know that the defense employment sector is booming?

As I pointed out in August, public sector spending - and mainly defense spending - has accounted for virtually all of the new job creation in the past 10 years:

The U.S. has largely been financing job creation for ten years. Specifically, as the chief economist for BusinessWeek, Michael Mandel, points out, public spending has accounted for virtually all new job creation in the past 10 years:

Private sector job growth was almost non-existent over the past ten years. Take a look at this horrifying chart:

Between May 1999 and May 2009, employment in the private sector sector only rose by 1.1%, by far the lowest 10-year increase in the post-depression period.

It’s impossible to overstate how bad this is. Basically speaking, the private sector job machine has almost completely stalled over the past ten years. Take a look at this chart:

Over the past 10 years, the private sector has generated roughly 1.1 million additional jobs, or about 100K per year. The public sector created about 2.4 million jobs.

But even that gives the private sector too much credit. Remember that the private sector includes health care, social assistance, and education, all areas which receive a lot of government support.

***

Most of the industries which had positive job growth over the past ten years were in the HealthEdGov sector. In fact, financial job growth was nearly nonexistent once we take out the health insurers.

Let me finish with a final chart.

Without a decade of growing government support from rising health and education spending and soaring budget deficits, the labor market would have been flat on its back.

America’s biggest — and only major — jobs program is the U.S. military.

Back to my January essay:

Raw Story argues that the U.S. is building a largely military economy:

The use of the military-industrial complex as a quick, if dubious, way of jump-starting the economy is nothing new, but what is amazing is the divergence between the military economy and the civilian economy, as shown by thisNew York Times chart.

In the past nine years, non-industrial production in the US has declined by some 19 percent. It took about four years for manufacturing to return to levels seen before the 2001 recession -- and all those gains were wiped out in the current recession.

By contrast, military manufacturing is now 123 percent greater than it was in 2000 -- it has more than doubled while the rest of the manufacturing sector has been shrinking...

It's important to note the trajectory -- the military economy is nearly three times as large, proportionally to the rest of the economy, as it was at the beginning of the Bush administration. And it is the only manufacturing sector showing any growth. Extrapolate that trend, and what do you get?

The change in leadership in Washington does not appear to be abating that trend...[121]

So most of the job creation has been by the public sector. But because the job creation has been financed with loans from China and private banks, trillions in unnecessary interest charges have been incurred by the U.S.And this shows military versus non-military durable goods shipments:

Defense spending means that the government is pulling away resources from the uses determined by the market and instead using them to buy weapons and supplies and to pay for soldiers and other military personnel. In standard economic models, defense spending is a direct drain on the economy, reducing efficiency, slowing growth and costing jobs.

A few years ago, the Center for Economic and Policy Research commissioned Global Insight, one of the leading economic modeling firms, to project the impact of a sustained increase in defense spending equal to 1.0 percentage point of GDP. This was roughly equal to the cost of the Iraq War.

Global Insight’s model projected that after 20 years the economy would be about 0.6 percentage points smaller as a result of the additional defense spending. Slower growth would imply a loss of almost 700,000 jobs compared to a situation in which defense spending had not been increased. Construction and manufacturing were especially big job losers in the projections, losing 210,000 and 90,000 jobs, respectively.

The scenario we asked Global Insight [recognized as the most consistently accurate forecasting company in the world] to model turned out to have vastly underestimated the increase in defense spending associated with current policy. In the most recent quarter, defense spending was equal to 5.6 percent of GDP. By comparison, before the September 11th attacks, the Congressional Budget Office projected that defense spending in 2009 would be equal to just 2.4 percent of GDP. Our post-September 11th build-up was equal to 3.2 percentage points of GDP compared to the pre-attack baseline. This means that the Global Insight projections of job loss are far too low...

The projected job loss from this increase in defense spending would be close to 2 million. In other words, the standard economic models that project job loss from efforts to stem global warming also project that the increase in defense spending since 2000 will cost the economy close to 2 million jobs in the long run.

The Political Economy Research Institute at the University of Massachusetts, Amherst has also shown that non-military spending creates more jobs than military spending.

So we're running up our debt - which will eventually decrease economic growth - and creating many fewer jobs than if we spent the money on non-military purposes.

For industry and adequate defense funding to survive ... the two must work together. Otherwise, he added, “this wave of debt” will carry over from year to year, and eventually, the defense budget will be cut just to facilitate the debt.

Secretary of Defense Robert Gates agrees as well. As David Ignatius wrote in the Washington Post in May:

After a decade of war and financial crisis, America has run up debts that pose a national security problem, not just an economic one.

"Eisenhower was wary of seeing his beloved republic turn into a muscle-bound, garrison state -- militarily strong, but economically stagnant and strategically insolvent," Gates said. He warned that America was in a "parlous fiscal condition" and that the "gusher" of military spending that followed Sept. 11, 2001, must be capped. "We can't have a strong military if we have a weak economy," Gates told reporters who covered the Kansas speech.

On Thursday the defense secretary reiterated his pitch that Congress must stop shoveling money at the military, telling Pentagon reporters: "The defense budget process should no longer be characterized by 'business as usual' within this building -- or outside of it."

But the EPA has found that exposure to 42 parts per million killed 50% of mysid shrimp within 4 days (and most of the remaining shrimp didn't last much longer).

In response to Naman's findings, the mayor of Orange Beach - the town located on Cotton Bayou - said that the City would conduct its own, independent tests:

The City's test results have now come back, showing 66 parts per million of dispersant.

The City Engineer for Orange Beach - Kit Alexander - also states that the EPA sets the screening level for dispersant at 750 parts per million (see above video). In other words, the EPA doesn't even test for Corexit at concentrations of less than 750 ppm, even though Corexit at much lower concentrations kills marine life.

I have personally been copied with emails sent to the Coast Guard documenting continued spraying of Corexit.

And yesterday, toxicologist Dr. Ricki Ott sent the following letter to the EPA which summarizes evidence of ongoing use of dispersants in the Gulf:

Re: Documentation of continued dispersant spraying in near shore and inland waters from Florida to Louisiana (despite contrary claims by USCG and BP) and documentation that dispersants made oil sink

Dear Mr. Coleman,

During the August 25 Dockside Chat in Jean Lafitte, LA, it came to our attention that the federal agencies were unaware -- or lacking proof -- of the continued spraying of dispersants from Louisiana to Florida. Further, the federal agencies were woefully ignorant of the presence of subsurface oil-dispersant plumes and sunken oil on ocean and estuary water bottoms. We offer evidence to support our statements, including a recently declassified subsurface assessment plan from the Incident Command Post.

But first, you mentioned that such activities (continued spraying of dispersants and sinking oil) -- if proven -- would be "illegal." As you stated, sinking agents are not allowed in oil spill response under the National Contingency Plan Subpart J §300.910 (e): "Sinking agents shall not be authorized for application to oil discharges."

We would like to know under what laws (not regulations) such activities are illegal and what federal agency or entity has the authority to hold BP accountable, if indeed, such activity is illegal. It is not clear that the EPA has this authority.

For example, on May 19, the EPA told BP that it had 24 hours to choose a less toxic form of chemical dispersants and must apply the new form of dispersants within 72 hours of submitting the list of alternatives. Spraying of the Corexit dispersants continued unabated. On May 26, the EPA and Coast Guard told BP to eliminate the use of surface dispersants except in rare cases where there may have to be an exemption and to reduce use of dispersants by 75 percent. Yet in a letter dated July 30, the congressional Subcommittee on Energy and the Environment reported the USCG on-scene commander (OSC) had approved 74 exemption requests to spray dispersants between May 28 and July 14.

Under the National Contingency Plan Subpart J, the authorization of use §300.910 (d) gives the OSC the final authority on dispersant use: "The OSC may authorize the use of any dispersant... without obtaining the concurrence of he EPA representative... when, in the judgment of the OSC, the use of the product is necessary to prevent or substantially reduce a hazard to human life."

Given this history of events and the NCP regulation, we would like to know what federal entity actually has the final authority to: order BP to stop spraying of dispersant; declare that spraying of dispersant after issuance of a cease and desist order is illegal; and prosecute BP for using product to sink oil.

The documentation of dispersant spraying in nearshore and inland waters includes:√ claims by USCG and BP√ eyewitness accounts√ fish kills in areas of eyewitness accounts√ photos of white foam bubbles and dispersant on boat docks in areas of eyewitness accounts√ sick people in areas of eyewitness accountsClaims by USCG and BP - and Counter Evidence

When reached for comment, Lt. Cmdr. Dale Vogelsang, liaison officer with the United State Coast Guard, told The (Destin) Log he had contacted Unified Command and they had "confirmed" that dispersants were not being used in Florida waters.

"Dispersants are only being used over the wellhead in Louisiana," Vogelsang said. "We are working with Eglin and Hurlburt to confirm what the flight pattern may be. But right now, it appears to be a normal flight."

Vogelsang also said Unified Command confirmed to him that C-130s have never been used to distribute dispersants, as they "typically use smaller aircraft."

Contradicted by evidence in same Destin The Log article and posted on websites:But according to an article by the 910th Airlift Wing Public Affairs Office, based in Youngstown, OH., C-130H Hercules aircraft started aerial spray operations Saturday, May 1, under the direction of the president of the United States and Secretary of Defense. "The objective of the aerial spray operation is to neutralize the oil spill with oil dispersing agents," the article states.

A Lockheed Martin July newsletter states that "Lockheed Martin aircraft, including C-130s and P-3s, have been deployed to the Gulf region by the Air Force, Coast Guard and other government customers to perform a variety of tasks, such as monitoring, mapping and dispersant spraying."

Further: "Throughout the effort, Lockheed Martin employees have been recognized for their contributions in a wide range of roles. IS&GS senior network engineer Lawrence Walker, for example, developed a solution to a critical networking issue involving two C-130's that arrived from the Air Force Reserve Command's 910th Airlift Wing at Youngstown, Ohio, as part of the cleanup mission."

May 11: USCG and BP claims of no dispersant spraying activities are further contradicted by intentional mislabeling of flight plans:

Destin - Fort Walton, FLJuly 30-31: Destin Mayor Sam Seevers investigating claims of dispersant sprayingResident and former VOO worker testified that he witnessed a military C-130 "flying from the north to the south, dropping to low levels of elevation then obviously spraying or releasing an unknown substance from the rear of the plane."

The unknown substance, Yerkes wrote, "was not smoke, for the residue fell to the water, where smoke would have lingered."

Austin Norwood, whose boat is contracted by Florida Fish and Wildlife, also provided a written account of a "strange incident."

While Norwood was observing wildlife offshore, he had received a call from his site supervisor at Joe's Bayou. After telling the supervisor that he and his crewmember were not feeling well, the supervisor had the two men come in "to get checked out because a plane had been reported in our area spraying a substance on the water about 10- 20 minutes before."

Norwoord complained of a bad headache, nasal congestion while his crewmember said he had a metallic taste in his mouth.

After filling out an incident report, both Norwood and his crewmember were directed to go to the hospital. The following day, the two men were once again "asked to go to the hospital for blood tests."

Aug. 2: Joe Yerkes reported sludgy brown oil and foamy white dispersant bubbles in Destin and 40 miles east in St. Joe Bay, just days before a fish kill of croaker, flounder, trout, and baitfish on August 5.

Aug. 24: Washington's Blog interview with chemist Bob NamanBob Naman is the analytical chemist who performed the tests featured in WKRG's broadcast. He was interviewed by or an August 24 report. Highlights include:• Naman found 2-butoxyethanol in the Cotton Bayou sample. [Ingredient in 'discontinued' Corexit 9527.]• Naman said found no propylene glycol, the main ingredient of Corexit 9500.• Naman said he went to Dauphin Island, Alabama last night and while there observed many 250-500 gallon barrels which were labeled Corexit 9527. Naman took pictures that he will soon be sharing.• Naman said he saw men applying the Corexit 9527 while he was in Dauphin Island and also in Bayou La Batre, Alabama.• Naman said the Corexit 9527 is being haphazardly sprayed at night and is impacting beach sands in a highly concentrated form.

Bayou La Batre, ALAug. 4: Fisherman Chris Byrant documents oil-dispersant in Mississippi Sound, northwest of Katrina Cut, in an area open to fishing in state waters between Dauphin Island and Bayou La Batre

Aug. 19, Aug. 21: Rocky Kistner with NRDC documents use of Corexit 9527a and Corexit 9500 and oil-dispersant visible sheen in area open to fishing in state watersPHOTOSAug. 23: Natural Resources Defense Council Switchboard postingWe spotted huge plastic containers marked with Corexit warning labels on the dock public docks near Bayou La Batre. ...The next day at a town hall meeting in Buras, LA, BP Mobile Incident Commander Keith Seilhan was asked about the use of chemical dispersants. "We are not using dispersants and haven't been for some time," he said.But when asked whether contractors who operate in state waters could be, he said he could not be certain. "We have lots of contractors, but no one should be using them. If they are, we need to know about it and stop it."

Miller tied an oil absorbent pad onto a pole and lowered it 8-12 feet down into deceptively clear ocean water. When he pulled it up, the pad was soaked in oil, much to the startled amazement of his guests, including Dr. Timothy Davis with the Department of Health and Human Services National Disaster Medical System. Repeated samples produced the same result. Three weeks earlier, there had been a massive fish kill along the same shoreline from Gulfport to Pass Christian.

Aug. 23: The methods for sampling subsurface oil used by Mr. Miller are also being used by Incident Command for the Deepwater Horizon as evidenced in a declassified document (p. 3).

Hancock County, MSAug. 23: Dispersant container found in Bayou Caddy Hancock County marsh. White foam indicative of dispersant use in marsh. Samples taken and being analyzed.

Summary: Based on these documents, and more, we believe that dispersant spraying in inland and near shore waters across the Gulf of Mexico from Louisiana to the western Florida panhandle is occurring now and has continued unabated (before) and since July 19, the date that the seafood safety panel proclaimed was the last day dispersants were sprayed. Based on these documents, and more, we believe that the dispersant spraying in inland and near shore waters is being conducted for the sole purpose of sinking the visible oil, an activity that is supposedly illegal. According to the University of South Florida, dispersed oil micro-droplets have been documented throughout the Gulf water column and are likely to affect the entire ecosystem.

The inability of the federal and state agents who attended the Dockside Chat in Jean Lafitte, LA, on Aug. 25 to find recent subsurface oil and ocean bottom oil or dispersant spraying activity in inland or near shore waters gives us zero confidence in these same agencies' declaration that they can find no oil or dispersant in Gulf seafood product.

Admiral Allen announced today that BP's fishing job being undertaken on their Mississippi Canyon Block 252 well has been called off due to total failure. You'll recall that I disagreed with the procedure when it was announced on the 21st, believing it was unwise and risky. After now attempting to fish out the drill pipe (actually 3 pieces) for several days, they have called off the job after completely failing at achieving their goal. Previously, Adm. Allen had said that they wanted to get all the drill pipe out before pulling the BOP (which I also think is unwise), and replacing it with the BOP from the DDII before completing the relief well.

***

They're going to pull the damn BOP anyway. That's right, they're going to pull the BOP anyway. What's amazing is that they're pulling it with an estimated 3,000 feet of drill pipe hanging in a set of rams, as well as two other smaller pieces in the stack and God knows what else. Admiral Allen said they're setting an overpull limit of 80,000 pounds over stack weight to pull it free, worried that more would dislodge the casing hanger and packoff that are supposedly in the casing hanger. They couldn't get the camera in that far down, but they still continue to assume that all that is somehow still in place after the well blowing out and flowing for 87 days, probably right through where they say the packoff is set. Not likely. Allen says they're going to actually try to pull the drill pipe, still hung in the rams and then, while suspending the BOP above the casinghead, cut the drill pipe with ROVs and drop it back in the well.

On the surface, it is because the government's tax-credit for first-time home buyers lapsed in April. It takes a couple of months lag-time between buyer purchase decisions and the actual close of escrow, and so the expiration of the tax-credit is just now hammering the market.

The leading monetary economist told the Wall Street Journal that this was not a liquidity crisis, but an insolvency crisis. She said that Bernanke is fighting the last war, and is taking the wrong approach. Nobel economist Paul Krugman and leading economist James Galbraith agree. They say that the government's attempts to prop up the price of toxic assets no one wants is not helpful.

The Bank for International Settlements – often described as a central bank for central banks (BIS) – slammed the easy credit policy of the Fed and other central banks, the failure to regulate the shadow banking system, "the use of gimmicks and palliatives", and said that anything other than (1) letting asset prices fall to their true market value, (2) increasing savings rates, and (3) forcing companies to write off bad debts "will only make things worse".

***

David Rosenberg [former chief economist for Merrill Lynch] writes:

Our advice to the Obama team would be to create and nurture a fiscal backdrop that tackles this jobs crisis with some permanent solutions rather than recurring populist short-term fiscal goodies that are only inducing households to add to their burdensome debt loads with no long-term multiplier impacts. The problem is not that we have an insufficient number of vehicles on the road or homes on the market; the problem is that we have insufficient labour demand.

Indeed, as I pointed out in April, unemployment is so bad that 1.2 million households have "disappeared", as people move out of their own houses and move in with friends or family.

Should governments feel it necessary to take direct actions to alleviate debt burdens, it is crucial that they understand one thing beforehand. If asset prices are unrealistically high, they must fall. If savings rates are unrealistically low, they must rise. If debts cannot be serviced, they must be written off.

The truth is that the Bernanke-Geithner plan — the plan the administration keeps floating, in slightly different versions — isn’t going to fly ....

Why won't it fly?

One reason is that economic psychologists tells us that consumer psychology has shifted for many years to come, and Americans are hunkering down and not buying anything other than the bare necessities. The Fed can try to play the part of all of the actors in the economy, but it won't work.

Increase asset prices. If the assets on the balance sheets of banks are falling, then why not buy them at higher prices and stop the bloodletting? This is the purpose of the TALF, Obama's mortgage relief program and the original purpose of the TARP.

***

There is only one direction the government is headed: increase asset prices (or, at least keep them from falling). Read White House Economic Advisor Larry Summers' recent prepared remarks to see what I mean. (Summers on How to Deal With a ‘Rarer Kind of Recession’ - WSJ) ....

These plans are not going to workAs aggressive as this campaign by the U.S. government is, it will have limited effectiveness because the extent of the writedowns of assets already on the books is going to be too massive. ...

Critics of Geithner, including Nobel Prize winning economist Paul Krugman, insist that the real problem is an asset collapse that led to a crisis of solvency in the banking system. In other words, Krugman argues that home values have come back to Earth, while Geithner hopes to solve the problem by pushing home values back to where they were. The conflict is a serious one because it dictates what response is appropriate.

***

At a closed-door meeting with House Democrats on Monday night, according two members of Congress who were in the meeting, Geithner repeated that he believed the problem with the financial system was a lack of liquidity and that if he could get credit flowing again, the problem would right itself. Key to this analysis is the question of whether one thinks the rise of housing prices was an artificial bubble or if the collapse is reversible and we can return to those highs. Policymakers have resisted labeling it as a bubble. [head of the president's Council of Economic Advisers Christina] Romer, on Monday, came close, referring to a "run-up in housing prices that sure looks like a bubble."...

If the crisis is understood as one of liquidity, then the appropriate response is to continue injecting capital into the banking system and fiscal stimulus into the general economy until asset prices return toward previous highs. Japanese policymakers initially understood their crisis to be one of liquidity and injected hundreds of billions during the 1990s, to little effect. But if the problem is something different -- a solvency crisis brought on by essentially permanent asset-price declines -- then the policy response needed is different.

So were housing prices in a bubble or not? And - if so - have housing prices now come back to earth?

Housing economist Dean Baker, the co-director of the Center for Economic and Policy Research, laid out his case at a risk conference last week for why we still have a housing bubble. Adjusted for inflation, home prices are still 15-20% higher than they were in the mid-1990s. “There’s no plausible fundamental explanation for that,” he says.

Why? Simple, he says: Economic fundamentals are all going in the other direction. Rental apartment vacancies are reaching record highs. Many segments of the housing market are still oversupplied. And the core demographic in the country—the baby boomers—are reaching the age where they’re more likely to downsize, buying less house in the years to come.

Far from some rosy estimates that housing is going through a temporary, once in a lifetime downturn, and that once the market bottoms, homes will again appreciate well beyond the rate of inflation, Mr. Baker argues that home prices are far more likely to increase annually at the rate of inflation, at best.

“If anything, I expect housing to be weaker than normal rather than stronger over the next decade,” he says. “People who say this is a temporary story, there’s no real reason to believe anything like that.”

The recent burst of good housing news has been fueled by government stimulus, including the tax credit, low mortgage rates and easy financing from the Federal Housing Administration. Mr. Baker, who had been a skeptic of the tax credit, concedes that it has worked. So, too, he says, has the FHA effectively supplied credit to goose sales.

But that’s likely for the worse, he argues, taking the opposite view of policymakers at the FHA.

“As a matter of policy I can’t see that we want people to buy a house in 2009 that’s 10-20% higher than it would sell for in 2011,” he says. “In so far as the FHA was encouraging people to buy homes in bubble markets that were not deflated, that’s not good for the FHA and you didn’t help the homeowner. We didn’t do those people a favor.”

Indeed, Baker said last November that the government's hasn't really helped homeowners, but has really been helping out the big banks instead:

The big talk in Washington these days is "helping homeowners". Unfortunately, what passes for help to homeowners in the capitol might look more like handing out money to banks anywhere else.

***

So, who benefits from "helping homeowners" in this story? Naturally the big beneficiaries are the banks. If the government pays for a mortgage modification where the homeowner is still paying more for the mortgage than they would for rent, then the bank gets a big gift from the government, but the homeowner is still coming out behind.

***

There are simple, low-cost ways to help homeowners who were victims of the housing bubble and lending sharks.... But this would mean hurting the banks rather than giving them taxpayer dollars, and we still don't talk about hurting banks in Washington DC.

The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with "the system," "the economy," and "ordinary Americans."

Baker has also said in numerous interviews this week that the only thing the temporary tax break for first-time buyers has done is moved home purchases up by a couple of months. In other words, the credit didn't motivate people who weren't planning on buying a house in the near future to buy. All it did was motivate people who were already planning on buying this year to buy before the credit expired, thus creating no real boost to the housing market.

The bottom line is that home sales are plummeting because housing was in a bubble. While most assuming that Americans are being more frugal and deleveraging - so that we will soon "get thorough this" and home sales will finally bottom - that assumption might not be true.

And there are huge waves of foreclosures coming down the pike. See this, this and this.

And the co-creator of the leading house price index - Robert Shiller - says that he is worried housing prices could decline for another five years. He noted that Japan saw land prices decline for 15 consecutive years up to 2006:

Indeed, it is possible that housing prices may never return to their peak bubble levels. See this, this and this.

Instead of fixing the real problems with our economy or genuinely helping struggling homeowners, the government has made everything worse by trying to artificially prop up asset prices in a way that only helps the big banks.

Though the super-sovereign reserve currency has long since been proposed, yet no substantive progress has been achieved to date. Back in the 1940s, Keynes had already proposed to introduce an international currency unit named "Bancor", based on the value of 30 representative commodities. Unfortunately, the proposal was not accepted. The collapse of the Bretton Woods system, which was based on the White approach, indicates that the Keynesian approach may have been more farsighted. The IMF also created the SDR in 1969, when the defects of the Bretton Woods system initially emerged, to mitigate the inherent risks sovereign reserve currencies caused. Yet, the role of the SDR has not been put into full play due to limitations on its allocation and the scope of its uses. However, it serves as the light in the tunnel for the reform of the international monetary system.

Keynes proposed that the Bancor was to be fixed in terms of 30 commodities, of which one would be gold. The arguments for currency fixed on a basket of commodities was that it would stabilize the average prices of commodities, and with them the international medium of exchange and a store of value.

As China's central banker said, the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

He proposed a global bank, which he called the International Clearing Union. The bank would issue its own currency - the bancor - which was exchangeable with national currencies at fixed rates of exchange. The bancor would become the unit of account between nations, which means it would be used to measure a country's trade deficit or trade surplus.

Every country would have an overdraft facility in its bancor account at the International Clearing Union, equivalent to half the average value of its trade over a five-year period. To make the system work, the members of the union would need a powerful incentive to clear their bancor accounts by the end of the year: to end up with neither a trade deficit nor a trade surplus. But what would the incentive be?

Keynes proposed that any country racking up a large trade deficit (equating to more than half of its bancor overdraft allowance) would be charged interest on its account. It would also be obliged to reduce the value of its currency and to prevent the export of capital. But - and this was the key to his system - he insisted that the nations with a trade surplus would be subject to similar pressures. Any country with a bancor credit balance that was more than half the size of its overdraft facility would be charged interest, at a rate of 10%. It would also be obliged to increase the value of its currency and to permit the export of capital. If, by the end of the year, its credit balance exceeded the total value of its permitted overdraft, the surplus would be confiscated. The nations with a surplus would have a powerful incentive to get rid of it. In doing so, they would automatically clear other nations' deficits.

As FT Alphaville's Izabella Kaminska reported recently, the IMF has recently floated the idea of SDR and perhaps ultimately Bancor as world reserve currency:

FT Alphaville missed this IMF paper when it first came out in April, 2010.

Authored by Reza Moghadam, director of the IMF’s strategy, policy and review department, it discusses how the IMF sees the International Monetary System evolving after the financial crisis.

***

In the eyes of the IMF at least, the best way to ensure the stability of the international monetary system (post crisis) is actually by launching a global currency.

And that, the IMF says, is largely because sovereigns — as they stand — cannot be trusted to redistribute surplus reserves, or battle their deficits, themselves.

The ongoing buildup of such imbalances, meanwhile, only makes the system increasingly vulnerable to shocks. It’s also a process that’s ultimately unsustainable for all, says the IMF.

***

All in all, the IMF believes there has simply been too much reserve hoarding going on:

Reserve accumulation has accelerated dramatically in the past decade, particularly since the 2003-4. At the end of 2009, reserves had risen to 13 percent of global GDP, doubling from their 2000 level, and over 50 percent of total imports of goods and services. Emerging market holdings rose to 32 percent of their GDP (26 percent excluding China). Twenty-seven of the top 40 reserve holders, accounting for over 90 percent of total reserve holdings, recorded doubledigit average growth in reserves over 1999-2008.

Holdings have also become increasingly concentrated, with over half the total held by only five countries. These numbers exclude substantial foreign assets of the official sector not recorded as reserves, including in sovereign wealth funds (SWFs), and yet invested in liquid, dollar denominated financial instruments, that have grown even more in recent years.1

Of course, in the first instance, the solution probably lies in closer collaboration between sovereigns, most likely via the more active use of such things as special drawing rights, says the IMF.

But in the end, a global currency makes the most sense, the paper concludes — especially since the SDR is currently just an accounting tool that draws on the freely usable currencies of member states , not an actual currency itself.

As they summarise:

48. From SDR to bancor. A limitation of the SDR as discussed previously is that it is not a currency. Both the SDR and SDR-denominated instruments need to be converted eventually to a national currency for most payments or interventions in foreign exchange markets, which adds to cumbersome use in transactions.

And though an SDR-based system would move away from a dominant national currency, the SDR’s value remains heavily linked to the conditions and performance of the major component countries. A more ambitious reform option would be to build on the previous ideas and develop, over time, a global currency. Called, for example, bancor in honor of Keynes, such a currency could be used as a medium of exchange—an “outside money” in contrast to the SDR which remains an “inside money”.

But before you get ready to burn your fiat currency, it’s not actually a turnaround the IMF sees being executed any time soon.

As they conclude:

It is understood that some of the ideas discussed are unlikely to materialize in the foreseeable future absent a dramatic shift in appetite for international cooperation.

However, in a possible indication of how seriously the SDR is being taken, the U.S. Postal Service is quoting SDR to dollar conversion rates:

A search of the U.S. Postal Office website shows that - as of April 2008 - the relevant web page did not have any reference to SDRs. The most recent revisions to this web page were made on July 30, 2010. However, I cannot tell whether the references to SDRs were added in the most recent July revision, or in a previous edit.

I am not implying that this is nefarious. I'm not entirely sure what this means, but - as far as I can tell - no other currencies other than SDRs and the U.S. dollar are mentioned in this section of the Postal Service website. At the least, it is interesting.

Whether or not SDRs (or Bancors) are coming soon, one thing is for certain. The dollar is losing its luster as world reserve currency. See this, this, this and this.

Update: Further digging shows that some postal services have adopted SDRs as part of the international multilateral agreements of the Universal Postal Union, an international organization of postal services. See this website from the Czech Republic, for example, from October 2009.

The earliest reference to postal service use of SDR's which I have found is a January 2007 version of the Swedish post office's website, stating:

Posten's responsbility for lost or damaged International Parcel Post is limited to SDR 40 per mailing + SDR 4.50 per kilogram of the gross product weight, in accordance with the acts of the Universal Postal Union (UPU).

By any measure the US has long used terrorism. In ‘78-79 the Senate was trying to pass a law against international terrorism - in every version they produced, the lawyers said the US would be in violation.

Tuesday, August 24, 2010

Bob Naman is an analytical chemist with almost 30 years in the field, based in Mobile, Alabama. When WKRG News 5 gave Naman samples of water from the Gulf of Mexico, Naman found oil contamination, and one of his samples actually exploded during testing due - he believes - to the presence of methane gas or Corexit, the dispersant that BP has been using in the Gulf:

But the EPA has found that exposure to 42 parts per million killed 50% of mysid shrimp within 4 days (and most of the remaining shrimp didn't last much longer).

And finding any Corexit is a little perplexing, given that Admiral Thad Allen said on August 9th that dispersants have not been used in the Gulf since mid-July:

We have not used dispersant since the capping stack was put on. I believe that was the 15th of July.

***

But I would tell you, there are no dispersants being used at this time.

More imporantly, Naman told me that he found 2-butoxyethanol in the sample.

BP and Nalco - the manufacturer of Corexit - have said that dispersant containing 2-butoxyethanol is no longer being sprayed in the Gulf. As the New York Times noted in June:

Corexit 9527, used in lesser quantities during the earlier days of the spill response, is designated a chronic and acute health hazard by EPA. The 9527 formula contains 2-butoxyethanol, pinpointed as the cause of lingering health problems experienced by cleanup workers after the 1989 Exxon Valdez oil spill, and propylene glycol, a commonly used solvent.

Corexit 9500, described by [Nalco's spokesman] as the "sole product" Nalco has manufactured for the Gulf since late April, contains propylene glycol and light petroleum distillates, a type of chemical refined from crude oil.

Moreover, Naman said that he searched for the main ingredient in the less toxic 9500 version - propylene glycol - but there was none present. In other words, Naman found the most toxic ingredient in 9527 and did not find the chemical marker for 9500.

Since BP and Nalco say that no dispersant containing 2-butoxyethanol has been sprayed in the Gulf for many months, that either means:

(1) BP has been lying, and it is still using 2-butoxyethanol. In other words, BP is still Corexit 9527 in the Gulf

or

(2) The dispersant isn't breaking down nearly as quickly as hoped, and the more toxic form of Corexit used long ago is still present in the Gulf.

Naman told me he used EPA-approved methods for testing the sample, but that a toxicologist working for BP is questioning everything he is doing, and trying to intimidate Naman by saying that he's been asked to look into who Naman is working with.

I asked Naman if he could rule out the second possibility: that the 2-butoxyethanol he found was from a months-old applications of the more toxic version of Corexit. I assumed that he would say that, as a chemist, he could not rule out that possibility.

However, Naman told me that he went to Dauphin Island, Alabama, last night. He said that he personally saw huge 250-500 gallon barrels all over the place with labels which said:

Corexit 9527

Here is a picture of the label (click on photo for larger image) of dispersant on Dauphin Island:

Naman further said that BP contractors are applying Corexit 9527 at Dauphin Island and at Bayou La Batre, Alabama.Naman also told me that Corexit 9527 is being sprayed at night, and that it is being applied in such a haphazard manner that undiluted 9527 is running onto beach sand. For confirmation of many of Naman's claims, see this, this and this.

Naman sent me the following additional pictures showing Corexit pollution, use and storage:

A bird eating a fish right next to the area where Corexit is handled:

Naman also sent me the following picture showing a strange oil mixture in the Gulf:

Please Enable Javascript for this Oil Price widget to workPlease Enable Javascript for this Oil Price widget to workPlease Enable Javascript for this Oil Price widget to workPlease Enable Javascript for this Oil Price widget to workPlease Enable Javascript for this Oil Price widget to workPlease Enable Javascript for this Oil Price widget to workPlease Enable Javascript for this Oil Price widget to work